UK Car Insurance Explained

Car insurance prices are a huge mystery to most of us. We don't get it. The car dealers don't seem to fully understand it. Heck - the car insurance company itself seems to be confused at times. So we decided to send our brave researcher into the dungeons that is the darkest, blackest backwaters of the automotive industry, in what can be best described as Indiana Johnson and The Secret of the Car Insurance Rate.

The Car: Insurance Groups

There are a lot of variables that come into an auto insurance quote. Most importantly, however, is the car itself: The way this is put into a system is called car insurance groups. This is a system of classification that separates all cars into groups - ranging from group 1, which is cheapest to insure, and includes cars such as the Citroen 2CV and the Fiat Panda. A the other end of the scale, we have group 20, where you may have to pawn your firstborn in order to pay your ransom to the insurance company. Cars in group 20 include most of the sexy cars out there, such as Porsches, flashy BMWs, shiny Audis, and posh Bentleys.

Things that affect the insurance group allocation are many, and not always logical either. As a general rule, expensive cars cost more to insure: mostly because they also cost more to repair if something does happen to them. Faster cars - especially cars that are built to look fast as well, such as Ferraris, Maseratis, and all "hot hatchbacks" , such as the Golf GTI - cost more to insure. Bigger engines equal higher car insurance rate.

Cars that are typically ignored by thieves may end up being the cheapest car insurance. Cars that have good factory-fitted alarm systems and immobilisers, tracking systems or other safety and security systems may also be put in a lower insurance group than similar cars without the features. Cars that are easier to break into are in higher groups, as it is easier to steal items from the car, etc.

There are a few things that may increase the price of insurance that doesn't impact the insurance group itself: After-market alarm systems, for example, don't change a car's insurance group, but may lower your insurance cost nonetheless.

Conversely, expensive car stereos, body modification kits, engine modifications, aftermarket alloy wheels, satellite navigation systems, custom paint jobs, and racing modifications such as suspension upgrades, drive-train upgrades etc, will increase your insurance premium.

The number of miles you drive is obviously also an influence: Statistically, if you spend more time on the roads, you are more likely to have an accident. This is also reflected in your insurance rates.

The Driver

The second part of the insurance premium is the person driving the car. Young drivers are punished because their youthful impertinence traditionally causes a lot of accidents. Male drivers are punished because too many of us are testosterone-overloaded thrill-seekers. People who have newly acquired their license are also put on a higher rate, as they are considered higher risk drivers due to their lower experience level. Obviously, if you are a young, male driver who just received your license, you are going to be paying for it on a spectacular scale.

Some health problems and any driving convictions (especially dangerous driving or driving under the influence of drugs or alcohol) may make it difficult or even impossible, to get cover at a reasonable price. If you do have any these, however, honesty is still the best way forward: If you forget to mention or withhold the information, it may invalidate your insurance policy. This may cost a lot more money in the long run, as you are effectively driving without any policy at all.

The next thing that comes into play is where you live. Inner city residents are penalised due to higher risks of accidents in inner-city traffic, vandalism and burglaries from the car. If you live in a quiet village that has not seen any crime since somebody painted the postman's cat orange in 1976, you are likely to get a far lower insurance quote.

The place where the car is kept is also an issue: If you can keep your car in a locked garage with armed guards in gun-towers and top-trained German attack-dogs surrounding your castle estate, you are likely to receive a lower insurance premium than if you have to park your car on the edge of a deserted dock landscape every night. Essentially: the more secure your car is kept over-night, the less you pay. Usually, insurance companies operate with three or four levels, such as "on the road", "on driveway" and "in locked garage", but if you have special circumstances, such as an alarmed garage, or other reasons why your car is more safe, make sure to tell your insurance company, as they may knock another couple of pounds of your price.

How to lower your insurance rates

Now that you know all the quirks the insurance system, lowering your insurance is easy: Buy a "boring" car with a good alarm system, move to a remote village, be about 50 years old with a perfect driving record, and drive less than 3000 miles a year.

Of course, that is not doable for everybody. There are, however, a few tricks you can try:

- Before you buy a car, check the insurance class of the car you are planning to buy, and see if any of the other models you are considering have a lower insurance class. You could consider choosing a 1.6 litre engine over a 2.0 litre engine, as this might drop you down an insurance class. And save you petrol, too!

- Make sure a good alarm system is installed.

- See if the cost of hiring a garage to keep your car in may actually be lower than the money you save on insurance.

If you are a new driver, it is possible to drive a car on a parent's or a friend's name. However, you are not building up your own no-claims discount, which means that when you finally do take out a car insurance in your own name, you are still paying a lot of money. In the long run - especially considering that insurance prices are slowly rising anyway - it is better to just bite the bullet and take out an insurance policy in your own name. It is expensive for the first year, but after that the price will quickly drop off.
- When shopping for an insurance, try ringing around and using on-line quote systems. Don't forget that large supermarket chains and your own bank also may have offers of insurance. Get at least 5 quotes before you choose. You can also consider services that compare prices, such as Confused or Insurance Supermarket, but be aware that while you get more quotes, they are not necessarily the best quotes.
- Check if your profession has special offers available to it, via unions, fleet insurance programmes or similar.

And, of course, most importantly: Drive carefully, and be vigilant about where you park your car, and about not leaving valuables in your car. Not making claims (even though it may not be your fault) is always better, as your no claims bonus (NCB) is going to be your best friend as time progresses.

Originally written for